Operating Exposure
Operating exposure measures the extent to which currency fluctuations can alter a company’s future operating cash flows—that is, its future revenues and costs. Any company whose revenues or costs are affected by currency changes has operating exposure, even if it is a purely domestic corporation and has all its cash flows denominated in home currency.
The two cash-flow exposures—operating exposure and transaction exposure—combine to equal a company’s economic exposure. In technical terms, economic exposure is the extent to which the value of the firm—as measured by the present value of its expected cash flows—will change when exchange rates change.